FocusFuel prices ignite US coal gasification

07 December 2007 22:51  [Source: ICIS news]

By Ben LeFebvre

HOUSTON (ICIS news)--Current oil and natural gas prices will likely hasten the petrochemical market’s move to coal gasification research and investment into 2008, industry sources said on Friday.

With thoughts of $100/bbl crude oil gone but not forgotten, Donald Chen, hydrocarbons and energy business director for Dow Chemical Greater China & Pacific, told ICIS news the industry may accelerate its push into the so-called “clean coal” technologies, some of which convert coal to methanol for the manufacture of ethylene and propylene.

“Under current oil and natural gas pricing levels, significant increases in coal gasification activities should be expected,” he said in an e-mail. “This is especially true for coal as a chemical feedstock. Right now, coal based chemistry is already competitive – witness methanol (prices) in China.”

Global chemical market intelligence service ICIS pricing assessed Chinese domestic methanol spot prices at $507-540/tonne for the week ended 7 December, a fall of $20-40 from the previous month. Market sources attributed its continuing price decrease to more coal-to-chemical plants coming online in the country.

In the US, methanol prices have continued to skyrocket, with producers blaming tight global supply to recent price hikes.

Dow, which signed a co-operative agreement with Shenhua Group in May 2007 to study the feasibility of a coal-to-chemicals plant in China’s Shaanxi prefecture, is by no means the only chemical company looking to get into the gasification game.

California-based alternative energy company Rentech announced on Tuesday it is hoping to complete the first phase of a coal-to-chemical plant in Natchez, Mississippi, by 2011. The company said it eventually plans to produce 28,000 bbl/day of fuel there using coal or petroleum coke and biomass supplements.

Eastman Chemical announced in July it is developing a $1.6bn petroleum coke-fed gasification project in Texas and will also participate in another gasification project in Louisiana.

Bank of America chemical industry analyst Kevin McCarthy noted in a research report that the coal-to-chemical field could become more crowded as more companies find coal an attractive alternative to crude and natural gas.

“Given high and volatile costs for these commodities, there exists today a powerful incentive to explore alternatives,” McCarthy wrote. “If crude oil remains more than $50/bbl in coming years, we believe projects will move forward such that coal-based chemical production will become more meaningful in the next decade.” 

This, he adds, could be an economic boon for the US.

“Estimated reserves of 268bn tons, or 250 years of supply, make the United States the ‘Saudi Arabia of Coal’,” McCarthy wrote. 

By: Ben Lefebvre
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